National Mineral Policy 2006 - Department of Mines

example, a mining major may outsource the exploration work to a junior, or where the majorin the process of exploration comes across a relatively small ore body in which it may not beinterested and which it passes on to a junior for exploration and disposal to small- ormedium-scale miners. It may be noted that the finance raised by juniors is basically riskfinance, which looks for high returns commensurate with the risk. In 2005, juniors accountedfor an exploration expenditure of US$ 2.3 billion out of the global total of US$ 5.1 billion.The Mongolian Gold vein and the Tibetan Gold vein, which were barely suspected asreserves of any worth, were prospected by Canada’s junior prospecting companies, usingrisk/venture finance from the Canadian and European financial markets, and were discoveredto be major finds. China has made great progress in finding and mining unexpected andunknown ore bodies by utilising the juniors’ model of Canada.1.31 For India to use the Canadian model, three major changes will be needed in the Indianpolicy, laws, and rules. First, a seamless transfer to a ML from a PL held by a prospectingcompany, which means that a junior PL holder should be guaranteed a ML in respect of hisfind without any exception or exemption; second, deletion of the third proviso to Rule 37(2)of the MCR, which prohibits a prospector from charging a premium for his find whiletransferring his ML to another miner; and third, speedy decision making on applications forPLs and MLs submitted by junior companies. A junior company raises funds from financialmarkets and these funds have to be deployed immediately. Once a proposal to prospect is putbefore the investor and a decision to invest is taken, the work has to start straightaway. Thismeans that the PL should be in the possession of the junior when it goes to the market to lookfor funds. The time available at the disposal of the junior is very limited. The PL shouldeither be granted or rejected within two months of the application. The current time frame oftwo years between an application and a PL is not conducive to investment through juniors àla the Canadian model. These shortcomings in the Indian policy, laws, and rules have beenresponsible for keeping the entire junior community out of the mining sector in India, thusdepriving the sector of the large amounts of FDI in the form of risk finance needed todiscover and mine its resources. A policy decision to attract the Canadian type juniorcompanies to invest in the risky business of exploration and prospecting is imperative and forthis, suitable amendments would have to be made in the laws and rules, as proposed later inthis chapter.18